I have 4x4 forged iron butt hinges, circa 1820. The leaf thickness is not constant. It is about 3/16 inch at the hinge pin side and about 1/8 inch at the outer edge. The slope is on the side with the countersunk holes. How do I make the mortises? If I make them flat to a depth of 1/8 inch then some of the hinge leaf will stick up above the door and jamb surfaces. Will the door close properly then, and must I allow extra distance between door and jamb for this?

Those hinge leaves close very tight together, so be sure not to mortise them too deep or you are likely to have a bind. Yes, for a neat job you have to make the mortises taper to match the leaves.
Make very sure that the right size of screw is used, so that no screw head is left above the surface, as they will also bind on the leaves, preventing them from coming together.
Casey